unethical pension waiver by employer

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martinharris

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Hi I am a new member of this forum and this is my first post..I was made redundant in 2015 due to liquidation and received a small ex gratia payment (<17K) and had to sign the waiver for pension lump sum as my employer made a condition. I received the waiver from my said employer’s solicitor in post while I was already jobless. The letter included the basic exemption and increase exemption options only and the maximum lifetime limit of ex gratia (€200K) was not mentioned anywhere in the letter and I was also not aware of it. I was asked to get an independent advice but since I was unemployed and had no money I couldn’t afford to go to the financial advisor. So I had to rely on the information in the letter from their solicitor. If the maximum life time limit of €200K was clearly communicated to compare the options then I would have made an informed decision and would not put myself or my family in a financial loss.

I was unaware of this until I reached to the age of 50 years in the past month when the pension provider disclosed this information that they weren’t sharing with me before even on my numerous enquiries about it. I admit that I unknowingly waived my rights but they unethically on purpose misled the staff with incomplete information. The tax due was only €1,600 but now my whole pension is taxable. What options do I have now? Thanks
 
Hi martinharris,

What’s the value of the pension? How many years’ service did you have with that employer? How many places have you worked since then and are you a member of another pension scheme now?

Gordon
 
It's standard practise in any of these situations for the employer to advise you to take external financial advice. It would not have cost much to be honest from a reputable pension adviser or solicitor. Given that you would also have got statutory on top of any ex-gratia payment it would have been a small sum will spent. Most employers are also very cautious as to the advice they give any staff member in a redundancy situation because inevitably it will come back to haunt them. I don't see the employer doing anything unethical here unless there is anything in their communication to you that indicates they did something wrong. Ultimately (and sorry to be so blunt here) but you are responsible for your own tax and financial affairs, not your former employer

You mention in your post that the company went into liquidation. If that is the case then there is no one to take an action against and to be honest, I doubt very much that you would win anyway.

What you need to do now is get some professional external advise as to your next options
 
Gordon Gekko said:
Hi martinharris,

What’s the value of the pension? How many years’ service did you have with that employer? How many places have you worked since then and are you a member of another pension scheme now?

Gordon
Click to expand...
Current value is around 80k. I was with that employer for 14 years but the termination payment was related to last two years of service. I’ve worked for two other employers after that but didn’t earn much to pay for a new pension..so this is all what I have.
 
Peanuts20 said:
It's standard practise in any of these situations for the employer to advise you to take external financial advice. It would not have cost much to be honest from a reputable pension adviser or solicitor. Given that you would also have got statutory on top of any ex-gratia payment it would have been a small sum will spent. Most employers are also very cautious as to the advice they give any staff member in a redundancy situation because inevitably it will come back to haunt them. I don't see the employer doing anything unethical here unless there is anything in their communication to you that indicates they did something wrong. Ultimately (and sorry to be so blunt here) but you are responsible for your own tax and financial affairs, not your former employer

You mention in your post that the company went into liquidation. If that is the case then there is no one to take an action against and to be honest, I doubt very much that you would win anyway.

What you need to do now is get some professional external advise as to your next options
Click to expand...

The money I received from the statutory redundancy was all spent on paying off my unsecured debt as my employer stopped any increase for 7 years before they went into liquidation.. so I was desperate to get the ex gratia for which I had to sign the waiver..the unethical part in the whole process was the miscommunication from the solicitor by not mentioning the maximum limit to compare (200k) and to prove that I’ve the letter of the solicitor. I know that the company doesn’t exist anymore but my query here is can I take this case to FSO? I am again jobless for 11 months now due to COVID and can not afford the fee for professional advice at this point
 
Based on the numbers you mentioned, I'm not sure the €200k is relevant. You waived your future right to the retirement lump sum from the Pension fund in order to get a higher tax-free redundancy lump sum (SCSB). Was your redundancy or pension lump sum likely to be close to €200k?
 
Conan said:
Based on the numbers you mentioned, I'm not sure the €200k is relevant. You waived your future right to the retirement lump sum from the Pension fund in order to get a higher tax-free redundancy lump sum (SCSB). Was your redundancy or pension lump sum likely to be close to €200k?
Click to expand...

I don’t understand
 
Conan said:
Based on the numbers you mentioned, I'm not sure the €200k is relevant. You waived your future right to the retirement lump sum from the Pension fund in order to get a higher tax-free redundancy lump sum (SCSB). Was your redundancy or pension lump sum likely to be close to €200k?
Click to expand...

Can you elaborate, do you mean the waiver only applies to the Pension fund amassed with that employment?
In which case any subsequent pension funds accumulated could be claimed using the tax free lump sum limit of €200k?
 
martinharris said:
The money I received from the statutory redundancy was all spent on paying off my unsecured debt as my employer stopped any increase for 7 years before they went into liquidation.. so I was desperate to get the ex gratia for which I had to sign the waiver..the unethical part in the whole process was the miscommunication from the solicitor by not mentioning the maximum limit to compare (200k) and to prove that I’ve the letter of the solicitor. I know that the company doesn’t exist anymore but my query here is can I take this case to FSO? I am again jobless for 11 months now due to COVID and can not afford the fee for professional advice at this point
Click to expand...

nothing to stop you raising a complaint but I presume it would need to be against the solicitor and unless you are expecting compensation from the solicitor, I'm not sure you are going to get anywhere.
 
Gordon Gekko said:
I don’t understand
Click to expand...
If the OP received a redundancy payment of €17k AND waived his right to a tax free lump lump from the Pension Scheme in the future, then the €200k is irrelevant. Normally one might waive the right to the pension tax free lump sum because under SCSB they are opting for a higher tax-free redundancy payment. If they retained the right to the Pension lump sum then more of the redundancy lump sum would be taxed.
But if the OP only received €17k as a redundancy lump sum then the €200k is irrelevant (unless the prospective Pension lump sum was going to be going to be over €200k).
And yes, the waiver only applies to the Pension fund attached to the employment from which he was made redundant.
 
Peanuts20 said:
nothing to stop you raising a complaint but I presume it would need to be against the solicitor and unless you are expecting compensation from the solicitor, I'm not sure you are going to get anywhere.
Click to expand...

I am not looking for any compensation I just want my right to revive that I waived due to the miscommunication and even if I have to pay tax on the ex gratia now I am willing to do that to save my pension funds
 
Conan said:
You waived your future right to the retirement lump sum from the Pension fund in order to get a higher tax-free redundancy lump sum (SCSB). Was your redundancy or pension lump sum likely to be close to €200k?
Click to expand...

This is my point that they didn’t mention the maximum limit for me to compare... based on the information provided by the solicitor I took the tax free ex gratia payment..if I knew the maximum limit I wouldn’t put my pension at risk for saving €1600 (that was the tax due on the ex gratia) at that time..

“Was your redundancy or pension lump sum likely to be close to €200k?”

NO!
 
martinharris said:
This is my point that they didn’t mention the maximum limit for me to compare... based on the information provided by the solicitor I took the tax free ex gratia payment..if I knew the maximum limit I wouldn’t put my pension at risk for saving €1600 (that was the tax due on the ex gratia) at that time..

“Was your redundancy or pension lump sum likely to be close to €200k?”

NO!
Click to expand...
I don’t understand the point you are making. How did you “put my pension at risk”?
What you did was simply forgo the right to taking part of your pension as a lump sum later at retirement (thus ending up with a higher pension - but no lump sum). Even if you were made aware of the €200k , how would it have affected your decision if the redundancy or pension lump sum was going to be less than €200k.
Perhaps you need to give all the figures to get a coherent response.
 
Gordon Gekko said:
Where is that pension money now? Is it still in the same scheme?
Click to expand...

Still in the PRB but I am unable to withdraw a tax free lump sum due to the waiver which was miscommunicated to me hence looking for suggestions here or possibly something that I’m missing in this whole scenario!
 
There are two ways of calculating your pension lump sum: -

  • 25% of the overall fund. So about €20,000 based on your current fund value.
  • A calculation based on your salary and service.
Unless your salary was six figures, the pension lump sum using the second calculation would not have been anywhere near €200,000.
 
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Conan said:
I don’t understand the point you are making. How did you “put my pension at risk”?
What you did was simply forgo the right to taking part of your pension as a lump sum later at retirement (thus ending up with a higher pension - but no lump sum). Even if you were made aware of the €200k , how would it have affected your decision if the redundancy or pension lump sum was going to be less than €200k.
Perhaps you need to give all the figures to get a coherent response.
Click to expand...

by saying I put my pension at risk I meant that I made tax free lump sum taxable due to that waiver...

as I mentioned in my original post the ex gratia Payment was less than 17k and the tax due on it was €1600 where as the current 25% of the pension fund would be around €20k will be taxable for around €4K and as the pension is growing this taxable amount will grow further..now again going back to the letter I received from the solicitor..the maximum limit wasn’t mentioned and due to this miscommunication I signed the waiver..only relying on the information based in the letter..I know it’s my fault but you can’t say that the solicitor’s letter wasn’t deceiving..
 
If your pension fund is now worth €80k you don’t have the option of taking a lump sum (tax free or taxable), since you waived that right in return for a higher tax-free redundancy payment. The full fund must be used to provide a pension when you decide to “retire” the fund. So the pension fund is not at any “risk”.
As I mentioned earlier, the maximum of €200k does not seem relevant in your case. I don’t see how the solicitor’s letter was deceiving if the €200k was not relevant to your situation.
 
I’ve found out that due to this miscommunication from solicitor (I’ve proof of this) I can challenge the waiver within 6 years time.. I’m looking for the clause now to qoute as reference but this information came from a reliable source..
 
From what I read here, the €200,000 is a red herring. Your ex-gratia payment was <€17,000 and your lump sum from the pension scheme was not likely to be anywhere near €200,000 either. So the €200,000 figure is irrelevant to you.

Would you have been better off getting some of your pension fund as a tax-free lump sum at retirement and paying the tax on the redundancy in 2015? Impossible to tell without knowing all the figures.

What can you do about it?

Even if you got someone to calculate that your pension lump sum was greater than the ex-gratia payment, you'd still have to make the case that you were misled in 2015. The Financial Services and Pensions Ombudsman can't help you as he only looks into complaints against regulated financial services firms. It looks like your complaint is against a solicitor.

You saved €1,600 in tax at the time. You might have saved a bit more in tax if you hadn't signed the waiver. But I honestly don't think that the amounts involved would make it worth your while pursuing an action against the solicitor.
 
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